Derivation of Tax Liability in Spain: How to Defend Yourself

Derivation of tax liability in Spain by Navarro Llima Abogados

06 Nov Derivation of Tax Liability in Spain: What to Challenge and How to Defend Yourself

Posted at 13:03h in News by Navarro Llima Abogados 0 Comments

In Spain, even if you are not the person who owes a tax debt, the Spanish Tax Agency (Agencia Tributaria) can decide that you must answer for it. This happens, for example, when the directors of a company are held liable for the taxes it failed to pay, when someone takes over a business and inherits the previous owner’s tax debts, or when a person is deemed to have helped a debtor hide assets so that the tax authorities cannot collect.

The questions that receiving a notice of this kind from the Tax Agency usually raises are therefore the following: why should I have to pay a debt I never incurred? Can I dispute the amount? What options do I have to defend myself?

The answer is that Spain’s General Tax Act (Ley General Tributaria, LGT) grants the person held liable specific rights of challenge, and knowing them, so as to act within the applicable time limits, is essential to protect your rights.

1. What is a derivation of tax liability in Spain?

As a general rule, tax debts must be paid by the principal debtor. However, the General Tax Act provides, in Articles 41 to 43, for a number of situations in which other persons or entities may be held liable for those debts, either jointly and severally or on a subsidiary basis.

The difference is that joint and several liability allows payment to be demanded without the principal debtor first having to be formally declared insolvent (declaración de fallido), whereas subsidiary liability requires that both the principal debtor and, where applicable, any jointly and severally liable parties have been declared insolvent. Unless the law expressly provides otherwise, liability is subsidiary.

In any event, non-payment of a tax debt does not automatically make a third party liable. The tax authorities must prove that the legal requirements are met, conduct the appropriate procedure and serve a reasoned decision identifying the facts and the legal grounds for the derivation and determining its scope.

2. Can the liable party challenge the principal debtor’s tax debt?

One of the main safeguards for the liable party is that they can dispute not only the grounds on which the tax authorities attribute that status to them, but also the tax assessments from which the debt claimed arises.

This is established by Article 174.5 LGT, which allows two matters to be challenged:

The factual basis for liability: the facts and circumstances that legally justify holding the person liable.
The underlying assessments: the adjustment made to the principal debtor’s tax position, including, among other aspects, the facts taken into account, the calculations made or the application of tax legislation.

However, the decision on the appeal cannot alter assessments that have already become final for the other taxpayers concerned. Its effects are limited to the amount of the debt demanded from the liable party who challenges them.

One exception should be noted: in the cases of joint and several liability under Article 42.2 LGT, the underlying assessments cannot be challenged, only the overall scope of the liability.

Notice of derivation of tax liability in Spain, Navarro Llima Abogados

3. The administrative file and the right to a defence

In order to challenge the underlying assessments, the liable party needs to know the background and documents on which the adjustment was based. It is therefore not enough to provide them with the derivation decision and the assessments; they must have access to the material needed to exercise their right to a defence effectively.

This has been recognised by the Spanish Supreme Court, which in its judgment 332/2026 of 18 March held that the records of the audit procedures that gave rise to the assessments must form part of the liability file.

This requirement also extends to judicial review before the administrative courts. Article 48 of the Administrative Jurisdiction Act (LJCA) obliges the Tax Agency to send the complete administrative file so that the court can examine all the background material in order to decide the dispute.

The consequences of documentary shortcomings that undermine the right to a defence must fall on the tax authorities, since this is a constitutional right of the liable party and an obligation on the authorities.

That said, this does not mean that any missing document amounts to a breach of the right to a defence. The liable party must also make use of their own means of challenge, disputing the data and grounds of the adjustment and providing evidence where necessary.

In short, the authorities must provide the material needed for a defence, but the person concerned must use it to put forward a specific and well-founded objection.

4. What to do if you receive a derivation of liability decision

Receiving a derivation decision does not mean you must automatically accept the debt. Before deciding how to proceed, it is important to review the decision, check the grounds on which liability is attributed, examine the underlying assessments and verify that the file contains the necessary documentation.

Given the impact this can have on the personal assets of the person concerned, it is advisable to seek advice from a professional specialising in tax law from the outset, who can identify possible grounds for challenge and assess the most appropriate defence strategy.

It is also essential to keep track of the time limits:

Hearing stage (trámite de audiencia): 15 days from the day after notification that the period has opened, in which to submit representations and documentation.
Challenging the final decision: one month from the day after it is served, by means of an optional application for reconsideration (recurso de reposición) or an economic-administrative claim before the Regional Economic-Administrative Tribunal (TEAR). If you opt for an application for reconsideration, you must wait for an express decision, or until it can be deemed rejected, before taking the matter to the economic-administrative stage.

In addition, the time limit for appealing must be distinguished from the voluntary payment period. Lodging an appeal does not suspend collection of the debt. Suspension must be applied for and, as a general rule, requires the legally prescribed guarantees to be provided, subject to the applicable exceptions.

It is therefore essential to note the dates of notification and keep track of each deadline. Allowing the time limit for a challenge to lapse may limit your options for defence, while failing to meet the payment deadline may trigger the enforcement period and the corresponding surcharges.

In short, it is essential to analyse each file, check that the authorities have acted in accordance with the law and identify possible grounds for challenge, without losing sight of the time limits for appealing.

At Navarro Llima Abogados we have experience advising and defending taxpayers before the Spanish tax authorities, particularly in derivation of liability, collection and debt challenge procedures. If you have received a derivation of liability notice, we can help you analyse its lawfulness, identify possible grounds for challenge and defend your rights and interests.